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Wages in Australia are currently determined by the interaction of demand and supply of labour in the labour markets The wage rate is the equilibrium of demand and supply of labour At the point the amount of labour supplied is equal to the amount of labour demanded If the real wage rate is above this point then there is excess supply of labour thus causing unemployment The unemployed people would then be willing to work at a lower wage hence put downward pressure on the wage rate which eventually move down to the equilibrium wage rate If the real wage rate is below the equilibrium wage rate then there is excess demand then supply In order to continue production firms will be willing to offer higher wages to attract labour This will thus lead to higher wages which eventually move to the market equilibrium There are many factors affecting the demand and supply of labour in the Australian labour market As the demand for labour is a derived demand This means that labour is demanded by the firm when there is demand for the firms goods or services Thus the demand for the firms products is the most important factor affecting the demand for labour Generally when the economy is booming the firm will experience increasing demand for its products This will directly lead to higher demand for labour However during an economic downturn more labour will be laid off as the demand for the firms products decreases Secondly the productivity of labour is another important factor The productivity of labour is defined as the output per unit of labour per unit of time Thanks to the government policies aiming to increase labour productivity during recent years the productivity of Australian labour has raised significantly This means that the firm can maintain the same amount of production will less labour employed Thus the firms will lay off the excess labour However this can be
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